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Confronting the Representative Consumer with Household-Size Heterogeneity

Author

Listed:
  • Christos Koulovatianos

    (CREA, Université du Luxembourg)

  • Carsten Schröder

    (DIW, Free University of Berlin,)

  • Ulrich Schmidt

    (IFW, University of Kiel)

Abstract

Most simulated micro-founded macro models use solely consumer-demand aggregates in order to estimate deep economy-wide preference parameters, which are useful for policy eva- luation. The underlying demand-aggregation properties that this approach requires, should be easy to empirically disprove: since household-consumption choices differ for households with more members, aggregation can be rejected if appropriate data violate an affine equa- tion regarding how much individuals benefit from within-household sharing of goods. We develop a survey method that tests the validity of this equation, without utility-estimation restrictions via models. Surprisingly, in six countries, this equation is not rejected, lending support to using consumer-demand aggregates.

Suggested Citation

  • Christos Koulovatianos & Carsten Schröder & Ulrich Schmidt, 2014. "Confronting the Representative Consumer with Household-Size Heterogeneity," DEM Discussion Paper Series 14-13, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:14-13
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Household size heterogeneity and the representative agent
      by Economic Logician in Economic Logic on 2010-10-18 19:58:00

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    More about this item

    Keywords

    Linear Aggregation; Dynamic Representative Consumer; Household-Size Economies; Equivalent Income; Survey Method;
    All these keywords.

    JEL classification:

    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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